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October282010

[Each week, our friend Ken Doctor — author of Newsonomics and longtime watcher of the business side of digital news — writes about the economics of the news business for the Lab.]

Most publishing stood proudly and stably on two feet, for decades.

You got readers to help pay for the product. And you got advertisers to pay as well. While American newspapers dependably got 20 percent of their revenue from readers, European ones have gotten more than 30 percent and Japanese ones more than 50 percent. In the consumer magazine, trade, and B2B worlds, the splits vary considerably, but the same two legs makes the businesses work.

Even public radio, seemingly a different animal, has followed a similar model. Substitute “members” for subscribers and “underwriters” for advertisers, and the same two-legged model is apparent.

In our digital news world, though, the news business has been riding, clumsily, a unicycle for more than a decade. Revenue — other than the Wall Street Journal’s and the Financial Times’ — has been almost wholly based on advertising. So, that’s why we’re seeing the big paid content push. “Reader digital revenue in 2011!” is the cry and the quest, as the News Corp. pay walls have gone up, Journalism Online hatches its Press+ eggs, The New York Times prepares to turn on its meter, and Politico launches its paid e-newsletters. They all have the same goal in mind: digital reader revenue.

While two legs are good, and better than one, consider that three would be better still. Three provide a stronger stool, and a more diversified business. We’re beginning to see a number of third legs emerging. So it’s look at the emerging newsonomics of the third leg.

The clearest to see is foundation funding. Foundations, led by Knight, have been pouring money into online startups. The startups, of course, are selling advertising and/or sponsorship, and some are selling memberships, as well. In addition to those same two legs, foundation funding provides a third leg — at least for awhile. Our 2010 notion is that foundation funding isn’t a lasting revenue source, but a jumpstart; that may change as we move toward 2015. We may well see foundation funding turn into endowments for local journalism, so it may become a dependable third leg.

Make no mistake: It’s not just the new guys who benefit from foundation “third leg” funding. Take California Watch, the Center for Investigative Reporting’s statewide investigative operation. Barely a year old, its dozen-plus staffers have written stories that have appeared throughout the traditional press, from major dailies to commercial broadcasters to the ethnic press. California Watch work — at this point wholly funded by foundations, though CIR, too, is looking back to the traditional legs for future funding — then is used by the old press both to improve quality and cut their own costs. So, indirectly, the old press derives benefit from this third leg of foundation funding.

Take a couple of examples from the cable industry. We’ve seen the Cablevision model, as the New York-based company bought Newsday, took the website “paid” and bundled it with its cable subscriptions. The notion, here: Cablevision is driving “exclusive” value for its cable (and Triple Play) offers by offering Newsday online content, content not otherwise available without paying separately (or subscribing to print Newsday). Newsday.com sells advertising, and online access, but the real value being tested is what its content does to spur retention and new sales in Cablevision’s big business: cable.

Similarly, Comcast — a pipes company fitfully becoming a content company as well as it tries to complete its NBCU deal — is making a big investment in digital sports. Headed by former digital newspaper exec Eric Grilly, ex of Philly.com and Media News, it’s a big play. Well-deployed in five cities — Chicago, Boston, Philadelphia, the Bay Area and Washington D.C. — and headed for nine more, all in which it runs regional sports cable networks. Comcast Digital Sports now employs more than 80 people and is producing more than 50 hours of programming a week in each market.

While Comcast is ramping up advertising sales and may test paid reader products as well, it’s that same third leg — the cable revenue — that is the biggest reason behind the push. “We want to provide value to the core business,” Grilly told me last week.

In the cable cases, news production can be justified because it feeds a bigger revenue beast. Thomson Reuters and Bloomberg’s large news staffs do the same, feeding bigger financial services businesses.

Lastly, let’s consider the new Associated Press-lead push for an industry-wide “rights consortium.” While its daily newspapers try to stand taller on the two legs of digital ad and reader revenue, the business that could emerge from this new company is about syndication. In that sense, it could be a business-to-business-to-consumer (B2B2C) push, aimed at a third growing revenue source for all, as news content un-tethered from publishers’ own branded sites is used — and monetized — across mobile platforms, mixed and matched in all kinds of ways.

Maybe, overall, it’s a regeneration process for the news business, as the old legs have grown weaker, the environment is forcing evolutionary experimentation. Over the next several years, we’ll see which third legs survive and prosper, and which others become dead ends.

September242010

What’s in a newspaper’s name? Well, quite a lot if you follow the case currently being fought over the title of Zimbabwean newspaper NewsDay. Two publishers who used the name 15 years ago for their title are attempting to prise the name, or compensation, away from new owners Alpha Media Holdings.

August122010

[Each week, our friend Ken Doctor — author of Newsonomics and longtime watcher of the business side of digital news — writes about the economics of the news business for the Lab.]

Thirsting for good news, the welcome given TBD.com by news observers has been a bit overwhelming. In a desert of too-scarce good news about the news business, TBD represents one of the potential oases, like its smaller — and largely nonprofit — counterparts from San Diego to Austin to the Twin Cities to New York.

Most of the first appraisals have focused on the site’s product innovations. Let’s now take an early look at the size of this possible oasis and the unique business model under it, to gauge what kind of a test it may be. Let’s look at the Newsonomics of launching what is the nation’s first combined local online news startup/24-hour news channel.

That combination is the most basic to understanding the business of TBD, informing both TBD’s cost structure and revenue models. If TBD turns profitable within two to three years, it may become a prototype for digital/video/TV city-based news businesses.

While there may be two dozen or more metro news channels in the U.S, none has yet combined with a online news site to the extent that TBD is doing. The only parallel may be Cablevision’s News 12, its longstanding Long Island/Connecticut/New Jersey-oriented station that got a new cousin when the parent company bought Newsday from Tribune in 2008. In a post on that acquisition, I noted the potential synergies in the deal:

Joint ad sales.

Synergistic news-gathering and production.

Monetizing cable-produced news video through Newsday’s site.

Since then, we haven’t seen a lot of that synergy in New York, as the cable news site and Newsday.com remain separate, with those who don’t subscribe to either having to pay for direct access. A cursory look at the sites doesn’t betray much sharing, but there may be more under the hood.

It is those three principles, though, plus an all-important fourth one — promotion — that should define this next, and bigger, experiment, as TBD.com and TBD TV (which has been rebranded from the former NewsChannel 8) take flight.

Let’s look first at the costs of TBD. TBD has added 50 new positions, all additional to the approximately 50 jobs ported over from the former NewsChannel 8. Jim Brady, TBD’s general manager, outlined the 50 for me: “About 30 doing news, including 15 reporters, six editors, two senior editors, six community engagement people. Another 20 doing tech, sales, product, and design.”

That tells us that the nut for TBD is about $3.5-4 million, salaries and operating costs combined. It needs to find new revenue — exclusive of what the former NewsChannel 8’s sales staff of seven brought in — to get to profitability. Profitability is a key goal for this for-profit company, and one key to proving out the model for use in other metro areas. The cost side is one of the areas that distinguishes the TBD experiment; it’s two to four times bigger than most of the local online news startups we’ve seen.

Key to our understanding here is that TBD — the website and the cable news station — is one organization. Brady is in charge of the P&L of it, though he has a dotted-line relationship to the ad sales heads. While it adds costs to do 24-hour cable news as well as 24-hour digital news, it offers more revenue opportunities as well.

The key synergy: a kind of virtuous circle of promotion to stoke growth of audience and advertising dollars.

“They have the big megaphone [of promotion],” points out Phil Balboni, now CEO of startup GlobalPost, but also a veteran of New England Cable News, which he built and operated. “They can push TBD on every program. Within a short period of time, they will get great brand awareness.” So, yes, TBD TV pushes people to the website, but TBD.com also pushes people to the cable news channel. And WJLA, the ABC7 affiliate also owned by Allbritton, promotes both. JLA’s been the second-ranked station in the broadcast market.

The idea: Big promotion drives in samplers. Then the site must convert a good 20 percent of them to regular customers.

So what does TBD need to get to profitability — and make itself the model to match? Let’s quickly look at the two big qualifiers, audience and sales.

A big audience: Let’s remember that TBD starts with a significant audience, though one far smaller than WashingtonPost.com, just to drop a name. It gets traffic from both WJLA and the former NewsChannel 8; both of their former websites now point to TBD.com. According to Nielsen, WJLA pulled in about 327,000 unique visitors and 1,516,000 page views in July, while NewsChannel 8 appeared to attract a small fraction of that.

Make no mistake: Gaining attention in a crowded media marketplace won’t be simple — and is one of the reasons for the fast-out-of-the-chute TBD Community Network of 129 bloggers.

The Post is formidable competition. It is a premier regional website (built by Brady and others) and in a June Nielsen report, showed a 5.27-percent increase in unique visitors year over year, to 10,089,000 unique visitors and 106,387,000 pageviews. It zigged — up — while the news category zagged down 2.74 percent overall for the same period.

So figure that TBD.com needs a web audience of between 10 and 20 million page views a month at some point in the next 24-36 months to get to profitability. That’s a fifth to a tenth of the Post’s online audience, which, we should keep in mind comes more from outside D.C. than in within it.

Significant new revenue from both TBD.com and TBD TV: The revenue will be mainly advertising. As a for-profit, TBD.com is taking a different route than non-profits MinnPost and Texas Tribune, for instance, both of which are focusing strongly on membership and corporate/institutional sponsorships. The nonprofits are thinking that maybe a third — or less — of their revenue will come from traditional “advertising.” For TBD, though, it’s all about the sale of advertising. Just as TBD TV is critical to TBD.com site promotion, its own revenue growth will be key.

Figure that as much as 30 percent of new revenue generated out of the new enterprise could come from new TV revenue; to the extent it does, the site’s growth could trend more to the 10 million monthly page views, than 20 million, and still be profitable.

Brady says a new online-only sales staff of four will drive both online-only and bundled sales, working with the established sales force. “You start with a sales force that has relationships with an auto dealer, for instance, ” says Brady. “You don’t need a million uniques to get a meeting with them.”

The questions here are familiar ones for local broadcasters and for newspaper publishers: How do you a traditional ad sales staff — one mainly used to selling “time” — to sell the web effectively? How do you blend the online-only sales force with TV-oriented one? How much do you emphasize online-only sales, or continue a focus on bundling with TV time?

It’s a complex sell, combining sales of space, time, and pay-for-performance advertising. “They need to sell four or five different kinds of advertising,” says Arul Sundaram, an industry consultant who formerly was vice-president of strategy for Internet Broadcasting, which has powered dozens of local broadcast station websites. Beyond selling cost-per-thousand display advertising, Sundaram ticks off various pay-for-performance (largely search-based), video, and mobile ad products that the operation should learn to sell as well.

Pioneering models is a tough business. As the news business looks for new models, the man of the moment is man behind the TBD curtain, Robert Allbritton, CEO of his eponymous company. Allbritton’s gotten credit for seeing, and seeing through, Politico, his first web venture, to on-again, off-again profitablity. Importantly, he’s been credited with allocating sufficient resources, even in cash-negative startup times to create journalistic products that attract audiences.

As Phil Balboni sees it, Allbritton’s move, especially in this economic climate, is “a gutsy statement.” In 2010, especially, no guts, no glory.

According to a post by LostRemote, Melville-based newspaper Newsday is expanding its news team across print and online, following the launch of AOL’s hyperlocal websites project, Patch.

The publication is reportedly advertising for 37 news positions to boost its local coverage both on and offline. Posts are said to include reporters, community journalists, a social media moderator and a community editor.

Newsday is the first newspaper we’ve seen aggressively ramp up coverage as the local competition intensifies. One interesting thing to watch: Newsday.com is subscription-only — subscribers of the newspaper and Optimum Online are given access — which could put it at a disadvantage in building open community tools that can reach critical mass.

June152010

I meet Trevor Ncube more than one year ago in Montreux during the Swiss Press Congress.

In his presentation, he made a strong case for this project, and I offered him our help as an INNOVATION pro-bono work.

So INNOVATION is very proud that last week NewsDay was able to hit the sreets of Harare.

The first 20,000 copies inaugural issue was sold our in a few hours, and now Trevor believes that the paper will double its circulation in less than six months.

INNOVATION’s Pedro Monteiro has been the consultant behind the project, ad he deserves our gratitude.

As you can imagine, his work has not been easy.

A country in deep crisis.

With no press freedom.

And just two dozens of journalists to produce a daily newspaper…

But the lack of local resources was not a problem because all the NewsDay team had a strong will to produce a real newspaper in a very surreal country where President Robert Mugabe has been in power since Zimbabwean independence in 1980, and a media crackdown saw the last independent daily newspaper banned by his party in 2003.

NewsDay will not win many awards, but I am sure that will win the hopes and hearths of a country needed of real journalism.

As Trevor Ncube said in the first issue: this is not a regular newspaper but the “hope of a tortured nation”.

Trevor Ncube, the founding chairman of NewsDay, was the host of the World Newspaper Congress in South Africa a few years ago and he wrote the preface of that year’s INNOVATIONS IN NEWSPAPERS report.

So we wish to him and the NewsDay team all our best.

The paper needs more help, so if you are willing to support this cause please write to Trevor at:

January292010

[Every Friday, Mark Coddington sums up the week’s news about the future of news and the debates that grew up around them. —Josh]

The iPad’s big reveal: Apple unveiled its new tablet — the unfortunately named iPad — on Wednesday, a week before the Super Bowl, and the buzz was as least as big: The Internet practically broke under the weight of the hype for Apple’s latest product. Rather than bury you in opinions about the specs and perks of the iPad, I’ll focus on what people are saying about the gadget’s potential impact on print and online media, especially journalism. Here goes:

Let’s start with the runup. Print media folks had high hopes that the iPad would revolutionize their industries — even, as The New York Times put it, giving old media “a chance to undo mistakes of the past. In three smart posts, the tech sites TechCrunch, Gizmodo and Wired said the iPad could be a tool to change publishing, but, as Jason Kincaid in TechCrunch wrote, “someone will need to deliver the content.” Then there were the pre-emptive debunkers, who argued that the iPad would be “just another distribution platform,” merely a circulation tool for journalism, and a “massive distraction” for newsrooms.

After the announcement, the overwhelming reaction from the tech world was one of disappointment. The Guardian has a roundup, and you can itemized lists of iPad beefs by the web giants Mashable, Gizmodo and Gawker, as well as new-media-watcher Steve Yelvington. But there were a lot of people wowed and encouraged by the iPad announcement: A lot of them were old media people — publishers, as this MediaWeek roundup especially shows. As MediaCritic’s Scott Rosenberg observed, the iPad demo played largely to the delight of those who want to mimic the paper experience, but those who see the web as bringing in a new relationship with news seemed to expect more.

Wired and The Big Money gave us a medium-by-medium look at the iPad’s potential impact, and neither was blown away by its possibility for newspapers and magazines. Between the roundups of Poynter and Alan Mutter and the thoughts of Nieman Journalism Lab director Joshua Benton, we have a pretty good spectrum of sensible takes from media-watchers from a variety of backgrounds.

A few points in the discussion worth highlighting: A number of tech writers — Twitter engineer Alex Payne, Rafe Colburn and j-prof C.W. Anderson — have noted that the iPad is fundamentally a closed platform, designed more to secure market share for Apple than to perpetuate the web’s openness. (They’ve got a point.) Second, quite a few others have pointed out that the iPad is a content consumption device, not a content creation one. This has several implications: It appeals to a different audience than most new tech products (the casual, “lean-back” user, says Jason Fry; the content-inhaling youth of the world, says David Carr). It makes content creation critical (see TechCrunch and Wired), and, as NYU professor Jay Rosen put it, it turns the nature of the Internet from the “read write web” back into the “read only” web.

Ultimately, the iPad’s utility for journalism is going to come down to the quality of content that news organizations create for it. Is that content going to be regressive, trying to recreate a print experience and neutering the power of a new tool? Or is it going to be rich, web-native and innovative, giving users an experience and value they haven’t had until now? (Will Bunch, Judy Sims and Alan Jacobson make similar points quite succinctly and eloquently.)

—

How leaky will the Times’ paywall be?: The biggest topic in journalism B.T. (Before Tablet) was The New York Times’ proposed paywall, and specifically, parsing the impact of Times execs’ statement that anyone coming to a Times article through “another Web site” will get free access to that article, without it counting toward their metered tally of page views. NYU professor Jay Rosen was the first to draw attention to the implications of that provision, concluding, “That looks a lot less like a pay wall to me. It isn’t a metered system if I can access the Times via the link economy without limit.”

In that case, Reuters’ Felix Salmon argued, online subscribers would be paying not for the Times’ content, but for how they got to it. Or, as Josh Young put it, the Times is “charging for being ignorant of all doors but the front.” (Some more great back-and-forth on why the Times would want such a flimsy paywall can be found in the Notes and comments of Rosen’s piece.)

Silicon Valley Watcher Tom Foremski and Times contributor Robert Wright acknowledged the paywall’s leakiness, too: Foremski proposed getting linkers to run the Times’ ads, and Wright wanted to add micropayments to the paywall. Steve Yelvington pointed out another big hole in the Times’ metered model: cookies.

Felix Salmon and Gawker’s Gabriel Snyder did the math and found it doesn’t look good for the Times; The Big Money’s Frederic Fillouxwas more optimistic about the numbers, provided the Times only charges the heaviest users. (Salmon is also disappointed that the Times has given up on the dream of being so essential that it can make big bucks from a free site.) If you want to do some number-crunching of your own, the Nieman Journalism Lab’s Jonathan Stray has a nifty little tool for you.

—

Newsday’s 35 online subscribers: Based on sources from an internal meeting, The New York Observer reported the number of subscribers of Newsday’s website since the Long Island newspaper — the nation’s 11th-largest newspaper by print circulation — put up a paywall three months ago, and the tally shocked a lot media observers: 35. MediaDailyNews detailed Newsday’s overall decline in numbers since the wall went up in late October.

Several people — not least Newsday’s own execs — quickly noted the paper’s unique case: It’s owned by Cablevision, and subscribers of the print edition or Cablevision’s cable or broadband access get free access to the site. (The paper estimates that amounts to 75 percent of Long Islanders.) As Steve Yelvington noted and Newsday hinted to paidContent, the paywall is much more about giving a free perk to cable and Internet subscribers than actually netting paid website customers. So it doesn’t make much sense to apply this scenario to other similar-sized papers. That being said, 35 is an astonishingly low number, to say the least.

—

Foursquare’s possibilities for news orgs: Foursquare — a fast-growing, mobile-based social network based on sharing your location — announced its partnership with the free daily paper Canada Metro, the company’s first partnership with a news organization. Metro will add location-specific coverage to Foursquare users, who could receive alerts when they’re near those spots.

On the social media blog Mashable, Jennifer Van Grove described Metro’s Foursquare content as a travel guide book that “unlocks the best a neighborhood has to offer. She calls the relationship symbiotic (mobile utility for Metro, print exposure for Foursquare and local businesses). With mobile news access exploding, this could be part of a future-of-journalism recipe: The tech blog ReadWriteWeb has an intriguing vision of the type of location-aware news and tips that might be possible through services like Foursquare.

Last week, Lehigh j-prof Jeremy Littau said that Foursquare can allow journalists to map out pertinent facts about their communities and help residents explore their neighborhoods. And Sean Blanda advised The New York Times (and other news organizations) to learn from Foursquare’s system of rewarding users.

—

Taking action in Haiti: Lastweek’sdiscussion about whether reporters in Haiti should become involved in the story they’re covering (in this case, particularly reporters serving as doctors) continued into the weekend. The Society of Professional Journalists reiterated its stance that journalists should “avoid making themselves part of the stories they are reporting.” This prompted a barrage of angry Twitter posts by Jeff Jarvis. Tyler Dukes listed them and fired back at Jarvis, while Gazette Communications’ Steve Buttry joined Jarvis’ attack on SPJ. NPR’s “On the Media” brought in a few more takes, and St. Petersburg Times media critic Eric Deggans proposed a middle way: It’s OK to help, but turn the cameras off when you do it.

—

Reading roundup: If your head isn’t already spinning from the loads of iPad commentary I’ve thrown at you, there are a few pieces from the past week that are well worth a read: First, Alan Rusbridger, editor-in-chief of the British newspaper The Guardian, deftly outlined the state of journalism and argued against paywalls for news orgs in a lecture on Monday. Here’s the summary, the full text (it’s long) and a smart response by Jason Fry questioning Rusbridger’s anti-paywall argument.

Second, The New York Times’ Nick Bilton points out how ingrained sharing, filtering and aggregating have become in the way we live on the web. It’s one of those short, simple pieces that neatly captures a concept that many of us had noticed but hadn’t sharply articulated yet.

Finally, the Knight Digital Media Center’s Michele McLellan — also a fellow at the University of Missouri’s Reynolds Journalism Institute — has a mind-blowingly thorough taxonomy of local news organizations across the country. This is definitely a post you’ll want to save for future reference.

January272010

Since Newsday, a newspaper based in Long Island, New York, put up its $5-a-week paywall three months ago, only 35 people have signed up. “That’s a gross of $9,100 per year for the site,” reports Lost Remote.

January132010

"There are plenty of examples of paid content thriving even when free alternatives are available," according to the magazine. "Punters are happy to pay for multichannel television even though commercial broadcast television is free. Such alternatives thrive because they offer desirable content. One considerable advantage to building a pay wall is that it forces newspapers to think hard about what their customers (as opposed to their advertisers) might really want."

That's a positive spin on pay walls. But a recent Ipsos/PHD survey found that 55 percent of consumers "would be very or extremely unlikely to pay for online newspaper or magazine content."

The Wall Street Journal is cited as an example of the right way to build and maintain a pay wall. Owner Rupert Murdoch, who acquired the paper after it built its wall, has said that people are willing to pay for content in newspapers, and thus people will be willing to pay for content online.

Murdoch called Google, Microsoft, and Ask.com "people which simply pick up everything and run with it and steal our stories." (Though the paper does allow some Google-referred users to read some WSJ articles for free.) But the paper still wants to see its content linked and cited via social media. And it wants to be part of the conversations taking place on Facebook, Twitter and other places. But how can it engage with social media when it locks its journalism behind a pay wall?

In an interview, Journal deputy managing editor Alan Murray said the paper doesn't want to rely on one source of traffic, meaning Google. He also noted that three of the major social media platforms -- Facebook, Digg, and Twitter -- are among WSJ's top 20 referrers. Thirty percent comes from Yahoo and Google.

"We have a strong brand," Murray said. "Half of our traffic comes through the front door."

Murray said social media is at present a comparatively small source of traffic. But he also spoke of its potential to drive readers who could eventually become paid subscribers.

Examples of WSJ's Social Media Activities

Though it can't promote and share the content created and then locked down on its website, the paper has worked to incorporate social media. Last year, Murray interviewed Treasury Secretary Timothy Geithner during a "Digg Dialogg." Geithner answered questions submitted and voted on by Digg users.

Murray also created a Future of News Twitter List, a "list of top tweeters discussing the future of news." Murray said he uses Twitter Lists to recommend the best Twitter sources within a particular niche, and added that some of those sources are Journal staff members. That helps promote the Journal's work because the staffers often talk about and link to their work on Twitter.

The Wall Street Journal was also one of the first organizations to use the Loomia Facebook App to show users which WSJ stories were read by their friends. (They eventually took it down because of performance issues.) Murray disclosed that the paper is in the process of closing a new partnership with Facebook, though he won't reveal details.

He also said the WSJ is developing social applications in-house. These will include widgets to highlight related and contextual content, in addition to its iPhone and BlackBerry apps.

Of course, all this content promoted through social media is meant to get readers to buy an online subscription to WSJ.com. Murray said that the Journal's business model of providing free peripheral content to sell its "core business in financial coverage" is the future of news.

Newsday's Pay Wall Goes Up, Traffic Drops

The WSJ has had years to develop a strategy to promote and share its content from behind the pay wall. If this is indeed the "year of the pay wall," many other organizations are going to have to learn to do the same.

When asked about its strategy for social media promotion from behind the pay wall, a Newsday spokesperson replied by email to note that a "share" button, which allows visitors to submit content to various social sites, is available above each story.

The question, however, is who'll be clicking on that button now that the content is locked down?

Neal Rodriguez is a social media consultant who features some of the smartest mashups on the web and interviews some of the brightest minds operating online. Neal writes for the Huffington Post. Neal helps drive influxes of traffic to some of the biggest web properties on the planet while pulling his son's Hot Wheels off his keyboard in Queens, New York.